tv Nightly Business Report PBS October 11, 2012 1:00am-1:30am PDT
>> this is n.b.r. >> susie: good evening everyone. i'm susie gharib. tom's off tonight. a "widespread improvement" in the housing market, that's what the federal reserve is seeing, and it says that's helping the economy make a comeback. a "set back" for stocks, on investor jitters about the global economy. the major averages are now in negative territory for october. is this a buying opportunity or time to take profits? and toyota, once known for quality, announces yet another major recall. does this make toyota less popular with consumers? that and more tonight on "n.b.r."! the nation's housing market appears to be building a new foundation. that's according to the latest snapshot of the u.s. economy released today by the federal reserve. the so-called "beige book"
compiles data from 12 fed districts, and it shows residential real estate improved in "all" districts in september. anecdotes from business contacts and economists noted existing home sales strengthened, while prices rose or stayed stable.or suzanne pratt takes a closer look at whether the broader economy is also showing signs of strength. >> reporter: here's a shocker: the u.s. economy is growing, but only at modest pace. that's what anecdotes, not hard numbers, from the fed's regional banks suggest about the business climate. 10 of the 12 fed districts reported economic activity in september expanded modestly since the last snapshot. only new york and kansas city saw a leveling off or slowing of growth. residential real estate was the one major sweet spot, showing widespread improvement. >> we've seen a pickup in house prices, we've seen a pickup in construction activity, a little bit better demand for loans. so, it generally corroborates what we've been seeing in the
economic reports on the housing market. >> reporter: conditions in the manufacturing sector were mixed, but somewhat improved since the last reading. meanwhile, the job market was little changed since the last report, which was the released in august. that was a bit of a surprise, given the recent drop in the nation's unemployment rate. but, at least one economist says it suggests the lower jobless rate may not be sustainable. >> it doesn't appear that the labor market is really showing all that much fundamental improvement and that's not all that surprising given the uncertainty around the pending fiscal cliff at yearend, the upcoming election. >> reporter: today's new economic evidence is consistent with third quarter g.d.p. of about 2%. we'll see in a few weeks whether that reading is as ho-hum as expected. suzanne pratt, "n.b.r.," new york. >> susie: while things are looking up for the u.s. economy, investors are worried about global economic growth. and so is opec: the oil
organization trimmed its forecast today for oil demand, due to a slowing global economy. crude prices shot up to $93 a barrel, and then pulled back to $91 after opec said that oil supplies are in good shape for the rest of the year. that's one reason stocks were down again today, making it three days in a row. with this latest pull back, all three major stocks averages are now negative for the month. by the closing bell, the dow lost 128 points, the nasdaq fell 13, and the s&p off almost nine points. so where do stocks go from here? joining us now, james awad, investment strategist at zephyr management. so, jim, is this the beginning of a correction? >> well, i think what you see is what you get. and what i mean by that is the time to be measured, the negatives that we are slowing worldwide, there's a chance of an accident in europe. the middle east is a mess, the
earnings season is probably not going to be great. and the emerging markets are slowing also. on the other hand, corporations in the united states are in terrific shape, the united states continues to grow. the election is tightening up, which means anybody who is elected is likely to govern from the center, and attack the fiscal cliff. and so you have to say in a low return environment, shares of multinational companies with growing earnings and dividends are probably not a bad place to be. but you want to buy when the markets are down, not when they're up, and you want to sell low quality, buy high quality, and buy them on corrections, not after big moves. i would not be surprised if you have a little bit more of a correction right here. >> susie: so let's talk a little more about this correction. it feels like a correction. between what's going on with oil prices going lower, some of these earnings reports that we've been getting. so what are the risks ahead, and is this a buying
opportunity? one strategist saying today that he's pretty upbeat because with central banks around the world pouring money into the financial system, it's kind of hard to see that the global economy will freeze up. so what's your take on this? risky period or a buying opportunity? >> well, look, it remains risky because with all of the money that the central banks worldwide have pumped in and continue to pump in, you have tepid growth that is getting slower, not bigger, not faster. and so you can't say that it's a time to take terrific risks. on the other hand, all that money does provide a cushion for the economy and for the financial markets so, the way you hedge that bet is to sell low quality, high risk assets, particularly after they've had a run. and to buy high quality lower risk assets when they have a correction. so i would say right now to investors tonight, the markets had a huge run, if have you something you don't have conviction in, if have you
junk bonds, if you have low quality stocks, sell them, and be prepared to buy into this correction high quality mult multinational corporations in the united states, and in asia where the long-term growth is. >> susie: all right. those alcoa earnings that came out last night, and its outlook for international growth weighed on the markets today. what's going to be the next big moment for the markets? is it going to be j. p. morgan on friday, what do you think? >> well, j. p. morgan is important, but the way i would view this is a mosaic that's being created every day, and what you want to see, more important than the earnings, is what companies say about the going forward outlook. do they see the world growing in 2013? what is their outlook for fourth quarter for the holiday season? and i think the market is going to react to the incoming data and it going to be very hard to forecast. but i think at the end of it, it's going to be good enough to prevent a collapse had the
market, but not good enough to prevent a, to create a major gain. so i wouldn't be surprised at the end of the year to see the averages where they are today, but go a little bit lower between now and then, and then rally afterwards. and of course you have the presidential election sitting right there in the middle there. and what you hope is that it's tight enough so that who ever is elected does have to govern from the center, you don't have obama if he's elected moving to the left or romney if he's elected moving to the right. we gotta solve these problems. >> susie: all right. we'll have to leave it there, and jim we apologize for that music in the background as a distraction for you and to our viewers, but the new york stock exchange iss in party season this time of year. but i'm glad you could think clearly through all of that. thank so you much, jim awad, at zephyr management. >> reporter: i'm erika miller in new york. still ahead, from auction site to e-commerce powerhouse, ebay introduces a new look and feel for shoppers.
>> susie: a deal to create a new defense giant is dead. earlier today, britain's b.a.e. systems and europe's e.a.d.s. called off their merger plans. both sides blamed concerns by european governments, especially germany, over how the potential tie-up would be structured. the deal between e.a.d.s. and b.a.e. systems would have created the world's biggest defense company by sales. some industry watchers say it could have spurred more consolidation among american defense companies. >> if this merger had come together it would have been pressure on the u.s. defense contractors to get together, to consolidate, as a counter balance to the new combination. but without the merger there is not a lot pressure to consolidate. in fact, if we get a romney presidency there may be almost no pressure on defense contractors. >> susie: as for shares of the big u.s. defense contractors today, they followed the broader market lower. boeing, general dynamics, lockheed martin and northrop
grumman all down about 1%. >> susie: for many americans, >> susie: for many americans, college is a gateway to economic success. for the past 60 years, schools across the country have considered "race" in admissions decisions, as a way to promote diversity on campus. today, the supreme court heard arguments on a case with the potential to do away with affirmative action. it's not just the education community watching this case. as sylvia hall reports, so are some of the nation's biggest companies. >> i hope the court rules that a student's race and ethnicity should not be considered when
applying to the university of texas. >> reporter: that's abigail fisher, who was denied a spot in the school's 2008 freshman class. u.t. says race wasn't a factor, but fisher maintai she was rejected because she's white. that accusation could change the way colleges have picked their students for decades. by state law, three quarters of u.t.'s students are accepted automatically, because they are in the top 10% of their high school classes. the rest go through what the university calls a holistic review, considering factors, like grades, essays, personal experiences and race. even fewer students got in that way in 2008, when fisher didn't make the cut. >> there are going to be certain financial consequences to this young lady because she could not attend the school of her preference. as u.t. says, it is critical within texas to be a u.t. graduate. she can't have that back. >> reporter: but the university has the support of some of the biggest companies in the country.
they include dow components like dupont, i.b.m., johnson and johnson, and walmart, who say they depend on colleges to train a diverse pool of potential employees. the companies filed a brief together saying, "the only means of obtaining a properly qualified group of employees is through diversity in institutions of higher education." other groups mirrored the concerns that our labor force would suffer without affirmative action. >> as we americans position ourselves to compete successfully in a global economy, we do our future leaders and our nation a grave disservice if we fail to prepare them to work effectively with people of different racial and ethnic backgrounds. >> reporter: the university says race is only a small part of the admissions process, but critics say it's not necessary at all. they worry if fisher wins, the case's implications could spill over to businesses as well. >> anything that increases the legal and compliance and regulatory burden is going to make it more difficult for businesses to be more efficient, to hire more workers, to create more jobs, to earn more profits, and that of course undermines investment in the economy.
>> reporter: the companies also argued that schools should be able to keep flexible admissions standards. however the court decides, the companies hope the decision will allow colleges to continue recruiting diverse student bodies. sylvia hall, "n.b.r.," washington. >> susie: a massive recall from toyota today. the auto-maker is recalling millions of vehicles around the globe to fix a faulty power window switch, that could smoke and catch fire. almost 7.5 million vehicles are being called in globally, 2.5 million here in the u.s. the cars and trucks involved were built between 2007 and 2009, and include the popular camry, corolla and rav-4 models. it's toyota's largest recall since 2010 when more than eight million units were brought in for problems involving sticky accelerator pedals. today's recall comes as toyota was finally re-covering from a series of setbacks, besides those 2010 recalls, inventory problems caused by last year's earthquake and tsunami.
so can toyota's reputation withstand another hit? joining us to answer that question is kunur patel, brand strategist at percolate. so kunur, no injuries or deaths with these defects in the cars, but it does make you wonder that will consumers sit back and rethink the reliability of buying a toyota? what do you think? >> well, toyota is a brand that clearly benefits from high loyalty among out base. so think of that person in your life who owns a toyota, you know, over time we've seen that those people tend to go back to toyota. so toyota doesn't really have to worry about its loyal base. those people love their cars and probably will go back. where this recall could hurt, however, is with those new customers who may have bought a different brand of car in the past and maybe considering toyota for the first time. it is important to remember
that -- i was just going to say, do you think then toyota needs to take some steps now to get out front to protect its brand? maybe an ad campaign, you know, as a brand strategist what do you think? >> definitely. i think that toyota already has shown it's extremely pro-active in this recall. it came out right from the beginning and said that there's this problem and we need to recall these many vehicles. we can probably expect some sort of marketing budget behind that message, an ad campaign perhaps. >> you know, we've seen some companies succeed and others fail when they have to deal with some kind of crisis. it comes to mind johnson and johnson during that tylenol recall many years ago, and it was a textbook case of how to do things. and then you think about the oil spill in the gulf coast and how bp handled all that. a lot of mistakes and missteps. so as you look at the toyota situation, if you were advising the management, what would you tell them about
lessons learned and what they should do? >> this is one that really comes back to the basics of marketing, you know, put your customer first. be honest, be transparent, address a problem as it comes up and tell the truth about what's going on. and respond quickly. today especially with the social media tools and the 24-7 news cycle. a brand and marketer needs to respond when these problems arise. so toyota i think is already following the textbook and doing the best it can given the circumstances. >> susie: thank you so much, kunur patel, brand strategist.
>> susie: on wall street today lots of anxiety over faltering global economies and nervousness entering the potential mediocre earning season. and just weighed on the markets. last night we told you about alcoa's better than expected results which kicked off the third quarter reporting season. well, today once investor has a chance to dig into the report, they found signs of weaknesses in some markets. alcoa wathe dow's biggest loser, it slid almost 5% to a one-month low. turning from metals to oil, two big west coast refiners also ended the session lower. the declines in tesoro and valero came after chevron issued a profit warning because of the impact of hurricane isaac. they were both down more than 5%. chevron lost 4%. also losing ground, shares of cummins, it lowered its 2012
sales forecast for a second time this year, customers remain uncertain about the global economy, and as a result they are delaying spending on new heavy duty trucks. shares of cummins end of the day down more than 3%, a two and a half month low. but there were some bright spots today, investors bought up shares of cost ko, it post forecasts of 1.39 a share, 8 cents above analyst forecasts. it appears customers were willing to pay more for membership for the privilege of buying in bulk. >> there was some speculation last year when they raised that number that it might keep some people from renewing their membership and scare some new members away. what we've seen thus far is that contrary too what's been happening, as a matter of fact, they were able to grow new membership and with strong renewal it continues toed ato the value proposition for the consumer. >> susie: today's pop puts the
stock within striking distance of an all-time high. fedex shares also moved higher after announcing that it is cutting costs. it says it has a four year plan aimed at trimming expenses which should result in nearly $2 billion in profits every year starting in 2015. the stock jumped 5% to just under $90, erasing losses it suffered from the profit warning it issued last month. and, investors also dialed in to sirius satellite radio, the company issued an upbeat outlook, saying they could see up to two million new subscribers this year. the number of shares changing hands today was more than triple the usual volume. shares climbed over 4.5%, putting sirius back toward this years highs. and finally, we saw another broad based sell off in the most actively traded e.t.f.s, biggest losers were the s&p 500 spdrs and emerging market ishares. and that's tonight's "market focus."
>> susie: all this week we're looking at the state of american retail, and what to expect from the industry's biggest selling season: christmas! well it looks like wal-mart is gearing up for a very merry christmas. at its annual meeting with investors today, the nation's largest retailer said its holiday layaway program has already rung up nearly half a billion dollars in sales. that's about the same amount customers put on hold during the "entire" holiday season last year. and with tablet computers shaping up to be the must have holiday item, wal-mart has ordered twice as many apple ipads and other tablets than last year.
wal-mart c.e.o. mike duke says the company is, "playing to win" in a very real way now in e- commerce. just yesterday it began testing same day delivery in several major cities, a service rival amazon already offers. also giving amazon a run for its money: ebay. the giant online retailer is overhauling its look, introducing a new logo, and a re-design of its website. ebay marketplace president devin wenig made the announcement in new york city today. erika miller has more. >> reporter: in the market for an hermes belt? or maybe a chanel purse? ebay hopes you'll bypass the boutiques and buy on its site instead. perhaps from seller linda lightman. >> i decided i was going to start selling my own clothes, shoes and accessories that i no longer wanted, needed or used. >> reporter: that was 12 years ago. today her ebay store linda's stuff offers 140,000 items. >> now we are in a 25,000 square foot office warehouse. and we are projected to do about
$16 million on ebay this year. >> reporter: she and other so- called power sellers have a big stake in the changes at ebay. there's a new logo, a less cluttered look, and a feed of photos of suggested items to buy. >> with personalization, and with making ebay just easier and more accessible, the hope is that the new generation of digital commerce will spend time on ebay. >> reporter: but many of these upgrades have already been telegraphed. so industry analysts were more interested in ebay's quiet launch of a new local daily deals service. >> it would seem to be a natural for ebay to the extent that they do have such a substantial user base. >> reporter: ebay has come a long way since its first sale of a broken laser pointer back in 1995. but if you still think of ebay as primarily an auction site selling second-hand junk, you're wrong. >> one sentence after the majority of the business are things that are new.
they are sold at fixed price. ebay is an end to end digital commerce power house. not a flea market auction site. >> reporter: ebay now boasts 25 million sellers and four times as many buyers. over $75 billion in commerce is done on the site a year. the new look comes at a key time: >> we really think ebay is a go- to destination for holiday shopping. they can find not only the things they know they want. but a lot of things they probably didn't think they might of wanted. >> reporter: and ebay is not necessarily talking about handbags and electronics. >> ebay sells about 10,000 automobiles a week on a mobile phone. >> reporter: which proves just about anything can be bought online these days. erika miller, "n.b.r.," new york. >> susie: tomorrow on "n.b.r." we continue our retail coverage, more people are going online to do their holiday window shopping, we'll show you what's driving consumers to make the switch. and we preview the vice
presidential debate, with republican paul ryan's budget plan in the spotlight, will it be a game changer. when it comes to the a.b.c.'s of investing, too many americans are getting a failing grade. with tonight's money file, here's gerri walsh, president of investor education at finra, the independent regulator of securities firms. >> we asked over 28,000 americans across every state a basic investing question: if interest rates go up, what typically happens to bond prices? only 28% got it right: bond prices typically fall. on an even more basic question, only 53% knew that buying a single stock provides a less- safe return than buying a stock mutual fund. survey after survey shows that far too many americans lack both financial literacy and basic math skills. and the situation is even more dire than you might think. not only are too many people ill-equipped to make financial decisions, but many americans seem to overestimate how financially literate they actually are.
when we asked people to assess their overall financial knowledge, two-thirds, 67%, gave themselves top marks. when you don't even know what you don't know, its hard to make smart choices. americans must navigate an increasingly complex financial marketplace to save for retirement and for their children's college education. as financial educators, and as a nation, we have our work cut out for us. i'm gerri walsh. the outspoken c.e.o. of j. f. morgan chase was speaking in washington today and said he'd be willing to pay more in individual taxes if corporate taxes were lowered so u.s. businesses could better compete globally. he also said his bank is assembling a war room to prepare for the coming fiscal cliff of spending cuts and tax increases that's slated to hit the economy this january. looks like steve balmer's tax
bill will be smaller, the microsoft c.e.o. bonus was choped in half as the online services division failed to meet the board's growth charges. according to a regulatory filing, ballmer's bonus was cut to just over $600,000. microsoft shares fell slightly today, to just under $29 a share, still they're up 13% on the year. and finally tonight, as we focus on retail and the upcoming holiday season, what do you get for the person who has everything? how about his very own jet pack, perfect for shooting off to those last minute meetings. if that's not your speed, $354,000 will hook you up with a special edition mcclaren 12c spider, one of just 12 made. you guessed it, the neiman marcus christmas book is hot off the presses, with lots of over- the-top, one-of-a-kind gifts. and there's a stunning his-and- her watch set, from van cleef and apparels. the price: just a million bucks. that's nightly business report for wednesday, october 10. have a great evening everyone. we'll see you online at: